For many years, Environmental, Social, and Governance (ESG) criteria in India were seen as an add-on—something to embellish annual reports with attractive visuals and narratives, primarily to enhance brand image. As we step into 2026, this era of superficial sustainability is firmly behind us. Indian businesses are now compelled to move beyond token gestures and embrace authentic, measurable ESG action.
The ESG funding landscape in India has experienced a major shift, evolving from voluntary compliance into a critical financial necessity. With global ESG investments expected to reach close to $8 trillion in 2026, Indian companies are facing increasing demands to disclose what is required—not merely what they wish. The focus is now firmly on accurate, transparent reporting, as regulatory bodies and investors insist on data-driven disclosures.
The Regulatory Hammer in India
The most significant force behind this shift is the introduction of mandatory, audit-ready ESG reporting requirements. In India, the Securities and Exchange Board of India (SEBI) has expanded its Business Responsibility and Sustainability Reporting (BRSR) Core framework, now extending deep into the supply chains of key industries such as technology and consumer goods. This means Indian corporations must treat ESG data with the same seriousness as financial statements, ensuring accuracy and compliance.
Globally, regulations like the Corporate Sustainability Reporting Directive (CSRD) in the EU and California’s SB 253 and SB 261 in the US are setting new standards for ESG transparency. While India is not immune to these trends, its own regulatory regime is rapidly catching up, with penalties and legal obligations for non-compliance becoming increasingly stringent.
From Storytelling to Data: India’s New Expectation
What sets 2026 apart for Indian companies is the demand for audit-grade, verifiable ESG data. Investors and stakeholders no longer accept vague claims about carbon neutrality or social impact. Instead, they expect primary data validated by independent third parties, reflecting real progress on environmental and social targets.
This has led to a surge in AI-driven ESG monitoring across Indian enterprises. Organisations are deploying advanced technology to track emissions, water consumption, and labour standards in real time, often across complex networks of suppliers. In a climate where greenwashing can result in reputational damage and regulatory sanctions, technology is indispensable for ensuring transparency and compliance.
The Bottom Line: Value Creation for India
The most important insight for India in 2026 is that robust ESG performance is now directly linked to financial success. Companies with strong ESG credentials are able to access capital at lower costs and deliver superior returns. Recent studies suggest that Indian firms actively pursuing climate and social targets are outperforming their peers, with cumulative returns up to 12% higher after two years of focused engagement.
Private equity and credit institutions in India are embedding ESG factors directly into their investment and exit strategies. Instead of merely ticking boxes, they leverage energy efficiency and supply chain resilience to drive profit margins and boost enterprise value.
The Way Forward for Indian Businesses
For Indian businesses yet to adapt, the message for 2026 is unmistakable: sustainability cannot remain the responsibility of a single department. It must be woven into boardroom decisions, financial planning, and procurement strategies. ESG is now central to business resilience and competitiveness.
As we look ahead, the winners will not be those with the best marketing campaigns, but those with the most reliable and transparent ESG data. In India’s new economic environment, transparency is not just about doing good—it is essential for sustained competitiveness.
ESG funding in India is channelling capital towards companies that demonstrate sustainable and ethical practices. This transition from a niche concept to mainstream strategy is reducing operational risks, attracting investors seeking both positive impact and competitive returns, and is projected to reach $33.9 trillion in assets under management globally by 2026.
Key Aspects of ESG Funding in India:
Core Pillars: ESG in India examines environmental impact (carbon footprint, pollution control), social responsibility (labour standards, gender diversity), and governance (ethics, board transparency).
Risk Mitigation: High ESG ratings often signal lower operational and reputational risk, enhancing resilience against regulatory actions and market disruptions.
Performance: ESG funds in India are geared towards competitive financial returns, while driving sustainability and long-term value.
Mechanisms: Includes thematic funds, ESG-linked loans with preferential terms, and rigorous screening to exclude companies with poor ESG performance.
Challenges: Regulatory scrutiny is intensifying, with SEBI guidelines aiming to curb greenwashing and ensure transparent, credible reporting. Indian firms must now respond to growing demands for comprehensive ESG disclosures.
ESG investing in India aligns capital with sustainability, providing a “social licence” to operate and enabling long-term value creation. As Indian companies adapt to these new requirements, ESG is not just a compliance exercise—it is fundamental to business growth and reputation.
By CA Sunil Singhi, Managing Partner, V Singhi
